In the most recent sign that Chilean securitizers are branching out, Santander Sociedad Securitizadora is backing a deal with future flows from contracts between the Public Works Ministry (MOP) and the concessionaire of Costanera Norte, a road project cutting across the capital city of Santiago. The multi-tranche bond will be worth 2.01 million inflation-indexed units (UF), about US$44.6 milllion at the current exchange rate. It is due out in the first half of November.

The deal marks Chile's first securitization of government contracts and forms part of a more aggressive push among local securitizers into unexplored terrain. (see ASR 9/16 p. 1) To date, Chilean global 2009s are the only government assets to back a domestic securitization. Santander structured that transaction as well, which amounted to the UF equivalent of US$52 million and priced at 5.7% or 65 basis points over the government's PRC bonds on January 7, 2002. Standard & Poor's affiliate Feller Rate and Fitch Ratings rated that deal AA+' on the national scale, even though the sovereign has a national scale rating of AAA'.

Fitch and Feller have both rated the upcoming transaction AAA' on the national scale, according to one source. "The rating is based on MOP's credit quality and the solid financial, legal, and cash flow structure developed by Santander," Fitch said in a release.

On the global scale, Chile has foreign currency ratings of A-'/'A-'/'Baa1' from Fitch, S&P, and Moody's Investors Service, respectively.

Santander's deal is backed by endorsable contracts covering funds that MOP owes the concessionaire for projects already completed. These projects are over and above what was envisaged in the original concession contract.

The bond is comprised of several maturities of up to five years, all of which are zero-coupon. Tenors vary in line with the life of the underlying contracts, said a source familiar with the deal. "The payment schedule has to observe MOP's budget; the entire amount isn't being paid up front," the source said.

All tranches are callable. A delay has been set up between final payment on each series and the corresponding payment from the MOP. If the Ministry pays before maturity date, the paper will be called.

Apart from structuring the deal, Santander Securitizer is master and primary servicer.

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